OPM’s New Awards Guidance: What Federal Employees Need to Know

The Office of Personnel Management (OPM) has issued new, government-wide guidance aimed at “targeting the highest-performing” federal employees for the largest awards and bonuses. Under the memo, agencies must:

• Strengthen performance management and “normalize” ratings.

• Reserve at least 60% of bonus pools for employees rated above Fully Successful.

• Use more real-time awards, such as Special Act awards, Time-Off awards, and Quality Step Increases (QSIs).

For Senior Executive Service (SES) and Senior Professional (SP) employees, OPM sets a 30% ceiling on Level 4/5 ratings in FY 2025 as an “encouragement” and makes that a hard limit in FY 2026—unless waived by the President. Compliance plans are due September 8, 2025, with a full ratings/awards report due February 27, 2026.

Where the Law Sets Boundaries

Forced Distribution Rules Still Apply

Current regulations prohibit assigning ratings through quotas or forced distributions for both general employees and SES. Ratings must be based solely on actual job performance. While OPM has proposed removing the SES ban, until a final rule is in place, agencies that “normalize” by imposing bell curves risk violating 5 C.F.R. Part 430. Award amounts can be sorted using comparative data, but the ratings themselves must remain performance-driven.

Collective Bargaining Obligations

For bargaining unit employees, any changes to performance distributions, bonus pools, or appraisal procedures must be consistent with negotiated agreements. Skipping this step can trigger unfair labor practice (ULP) complaints. Agencies must follow both the substance and process requirements of the collective bargaining framework.

Merit System Protections

The civil service is built on merit-based decisions. Awards must avoid favoritism, retaliation, or discrimination. Patterns that disadvantage protected groups can raise Title VII or Age Discrimination in Employment Act (ADEA) concerns. Agencies should ensure award criteria are clearly documented, job-related, and consistently applied.

Pay Caps and Approval Requirements

Cash awards over $10,000 require OPM approval; those over $25,000 need Presidential sign-off. The aggregate pay cap still applies, meaning excess amounts roll over into the next year as a lump-sum payment. SES/SP award mechanics must be carefully managed to avoid overstepping these legal limits.

Watch the SES/SP Rulemaking Timeline

The 30% Level 4/5 cap for SES/SP employees becomes mandatory in FY 2026—but as of today, the regulation still forbids such quotas. If OPM’s rulemaking is delayed, enforcing a hard cap before the rule takes effect could be challenged as exceeding agency authority.

Takeaway for Federal Employees

Expect fewer top performance ratings and larger awards concentrated in a smaller group. While OPM’s memo signals a culture shift toward differentiated rewards, agencies must navigate existing legal guardrails. For now, employees should:

1. Understand their agency’s appraisal process and any negotiated procedures.

2. Document performance in terms of measurable results.

3. Watch for updates in the Federal Register on SES/SP rating rules.

Legal Disclaimer: The information provided in this article is for informational purposes only and should not be construed as legal advice. While I am a federal employment attorney, this post does not create an attorney-client relationship. Every situation is unique, and legal outcomes depend on specific facts and circumstances.